The Pharma C.E.O. Who Wants to Lower Drug Prices

Companies can drop prices and still make money, says the chief executive of GlaxoSmithKline.

Comments: 21

  1. I worked in drug research for a major pharmaceutical company for thirty years. Based on that experience, my observation is that the problem with the pharmaceutical industry and perhaps many other corporations in general is they are pursuing the wrong business model. Driven by Wall Street they have focused on short term profits at the expense of long term gains. Of course businesses must be concerned about profit, but what is the desirable profit horizon - 1 year, 10 years, 20 years? Front to back it takes on average 12 years or more to develop a new drug. What sense does it make to sell stock in a drug company minute by minute on Wall Street. That's just crazy, but that is what drives drug pricing - make as much money as you can today and to hell with tomorrow, even if by waiting till tomorrow you would actually end up making more money. It is all about right now. The pharmaceutical industry requires a long term horizon and long term investment, but more and more the Wall Street tail is wagging the Pharmaceutical dog. It is not good for the public and it is bad for the drug companies.

  2. Drugs are often priced for a 1,000 to 4,000% profit in America. It's ludicrous. Too much of OUR hard-earned taxpayer money - to say nothing of insurance premiums, co-pays and deductibles and one's insurance company not covering a drug - is being spent on making money for investors.

    Get OUR medical complex out of the insatiably greedy "markets". We need an arm of the Consumer Financial Protection Bureau to concentrate on BIG pharma and medicine that gouges every patient and taxpayer they can. Life, quality of life and death should not be based on the "highest bidder".

  3. This may sound insensitive or uncaring, obtuse or unrealistic, idealistic or even delusional...
    If you want to stop abuses of political power, you must learn how to say no.
    Drugs are soporific to freedom. Yes, drugs can be salves to pain or suffering.
    But...
    Pain and suffering take many forms.
    Sometimes, killing pain means killing people.
    Do you want to do that?
    I do not...

  4. My local pharmacy quoted me $740 for a three month supply of my prescribed generic statin. The average Canadian pharmacy would have charged $92. How does that work for margin of profit? As for many other products, ranging from phone, internet, to health care and food, US citizens pay a lot more than Europeans and sometime Canadians for the exact same thing. The US has developed a huge, capillary sponge that mops up the money of each and every citizen to keep an irresponsible level of profit going. Far from the promises of the past, we ended up living in a world of trickle up finances.

  5. As long as insurers and pharmacy benefit managers are astraddle the pricing machine and extracting a slice for themselves drug manufacturers smaller and with less clout than GSK will be locked in a defensive crouch, an overwhelming feature of which is very high but somewhat negotiable list prices.

  6. It's unfortunate that Vikas Bajaj failed to ask the big brand name elephant in the room question, "Should pharmaceutical pricing be regulated as it is in Germany, Britain and just about every other civilized nation?" Germany operates through "sickness funds", while a host of others use government intervention. The plague that pharmaceuticals have place on our seniors and all patients dealing with a chronic condition or major life event is nothing short of criminal.

    Need a Hep C cure? Pay $100,000 here or hop a plane to Bombay and get the same Gilead med for 1% of the cost. Can't afford the fare? Good luck. How is that the American way?

  7. "If you look around the developing world it’s obvious that price plays a big role in access."

    Brilliant. That's not too hard to figure out, surely. Sky-high prices are a significant barrier to the use of modern drugs.

    "...but if you look at GSK the last five or six medicines we’ve launched, we’ve launched at or below the prices of the technologies that we’re aiming to replace."

    Even assuming that this is true, read carefully here. This is exactly how the $80,000 price for the hepatitis C drug was justified, on the ground that $80,000 is less than the cost of treating liver cancer. That is the beginning of the inquiry, but not the end of it.

    For one thing, how much of the development of the new drug in question was in fact paid for by public money in the form of NIH money or otherwise? When do we the public, who invested in this development, get our share of profits back, or does the drug company just get to keep it all? (We all know the answers to those questions!) What in fact was the research and development cost of the drug in question? How much of the outrageous price represents the cost of advertising as opposed to the cost of research?

    "We’ve never had better new product sales. "

    Yes. And we've never experienced such catastrophic growth in the cost of health care either. The two are connected.

  8. Most first world countries control drug prices, allowing for a reasonable profit. Despite this and despite excessive executive salaries, R&D costs, and high advertising costs which in many cases exceed R&D expenses, Big Pharma averages close to 20% net profit. This comes at the expense of the American consumer. Legal importation of FDA approved drugs for personal use would be the starting point in an effort to level the playing field.

  9. This is rich. He's trying to get in front of this because even some corporatist Republicans and Democrats are making noise about slapping Big Pharma.

    No one can rely on corporations to do the right thing although you can rely on them to hire good PR firms who tell them after many focus groups what they have to say to avoid really painful results.

    PR firms even get sympathetic interviews and articles in the NYT about them. Even the Saudis have managed to get some good PR in the Times. Good PR people can be worth their weight in gold. Unfortunately for the humans involved. You know the Americans who have to pay these prices PR won't help them. Tax dollars will still flow to big Pharma and lower prices will still be paid elsewhere unless the Government makes some serious efforts to really regulate prices and enforcement of those regulations .

    Nice try, Andrew, but I don't buy it.

  10. Is the headline of this op-ed piece an oxymoron?

  11. The pharmaceutical industry should quit advertising directly to consumers, go back to marketing to doctors who can make informed judgments for their patients.
    This would not only result in significant savings but also return the culture of the industry to a more research oriented management structure.
    They now have too many marketing types and bean counters; more researchers and docs leading these companies will result in a better outcome for consumers and the companies themselves!

  12. Left out of the equation is that about 1 in 10 new drugs that gets to human trials actually ends up being approved several years later, and how much it costs to develop each of the 10 before either development is discontinued, or the drug is approved.
    To continue investing in new drugs, companies have to balance development costs with anticipated sales before the drug is either superseded by a new competitor or loses patent and is replaced with a generic equivalent. Sadly, this puts high upwards pressure on pricing for drugs prescribed for rare diseases, or for short periods.
    Special advantages in registration or patent extension are granted by FDA and EMA to encourage development of otherwise unprofitable medicines for rare genetic deficiencies and cancers. Expanding such active engagement of regulatory agencies might enable drug developers to better face short-term shareholder demands while meeting the needs of more patients currently left in the gap between pricing and prescription coverage.

  13. The US is the only first-world nation that does not control drug prices (for the vast majority of patients). This CEO recognizes that attitudes here are growing strong enough to reverse that, so he's now working to make some modest changes while preserving the vast profits now made by Big Pharma. No need to scorn him, it's his job.

    Now that the US Senate is likely to be controlled by Democrats, and the House of Representatives is somewhat in play, it's time to elect non-obstructive people who will improve the ACA--and controlling drug prices is part of that equation, as is a public option (Medicare for all) that was originally impossible to include.

  14. Great. A voice of reason and humanity in a sea of greed ... for the next five months. I hope his successor shares his philosophy.

  15. Dreadful interview. Industry double talk. The headline says the guy wants lower prices, and there isn't a dollar sign or a percentage point in it.

  16. The Congress issue a law that prohibits consumers under penalti to buy drugs out of the country. So, we are prisoners of the drug´s companies and Congress. Pharmaceuticals companies always talk about free market, to whom?, no for the consumers. It is important for consumers to buy medicines outside of the USA. The problema is resolved for ever. Congress receive campaign contributions, later , the elected Congress acts on behalf of those companies and against the electors. What is that?

  17. Thank you Mr. Witty. I wish you a wonderful retirement and I hope you will use some of your free time to advocate for a more humane approach to drug pricing. As you point out, this can be a win win situation for pharmaceutical companies and consumers. We can only hope that other CEOs in Big Pharma will get on board too.

  18. This man's company, GSK, charges $65 for inhaled albuterol, essential for asthmatic patients, is available for US$6 across Europe and for US$10 in the USA before 2012. The cost-of-goods is about US$2; the drug was first marketed in 1986. There are similar enormous markups by GSK on its generic inhaled steroid, fluticasone. American asthmatic never-smokers die for lack of these drugs. The NY Times hasn't printed about the deaths and the key forces (in addition to the company prices and insurance deductibles) involved, but it headlines this man as "The Pharma CEO Who Wants to Lower Drug Prices". What happened to balanced reporting? Challenging the interviewee?

  19. Why was there no question about marketing? Drug companies spend about a third of their budget on this which is 2 to 3 times what they spend om R & D.

    Marketing has two purpose, one directed toward users and one directed towards physicians.

    Basically what they want patients to do is to get their physicians to prescribe drugs they do not need. This is the purpose of the odious ads we are bombarded with on TV, radio, and print media as well as in the mail and on the NET. When I was young, these were illegal and it is my understanding they could be made illegal again by act of Congress. Drug advertising to patients is illegal in all other countries except New Zealand.

    Drug marketing to physicians is enormous and multifaceted. The purpose here is to get physicians to use new expensive drugs in cases where older cheaper drug do as well if not better. It would take a book to examine all the techniques used by the companies. There are the unqualified “pushers” that haunt doctors’ offices. You can read about them here,

    http://www.theatlantic.com/doc/200604/drug-reps.

    The most scandalous techniques involve payments to physicians. The industry is constantly telling us the have reformed this practice which is then followed in a little while by news of yet more outrages. I’ll leave it at that except to recommend you read

    http://www.nytimes.com/2007/11/25/magazine/25memoir-t.html

    which give you a good feeling for the morals of the drug companies.

  20. The US COULD, as an option, open the health care group now available to federal employees (and families of Congress members) to the public at a large. The Rx portion of that coverage COULD have a formulary of covered medications that based the purchase price at an average of what is charged by the same companies for the same drugs in Europe, Canada and Australia. We also COULD make all premiums paid for such coverage, or from other group plans, fully deductible on the federal income tax. We COULD, but do not!

  21. Many drugs are researched by government funded research for years. These are the risk takers. Once the research shows that the drug has possibilities the private guys step in. The chance of failure is less likely and the possibility nof success grater. Then, the clinical research goes on and is expensive but can be measured. The clinical trial costs can be measured. all of this then allows a base line price of that drug to be developed. Once this is done the cost could be included and a reasonable profit of 50-70% included. However what about the original research by the government taxpayer sponsored research? that should be given value and the taxpayer awarded stock or some payment. WE taxpayers should be shareholders in many drug companies and this money returned for health care to our citizens. In Europe the governmets review the efficiency, cost and regulate a reasonable price. They average drugs 6X cheaper then ours , for the same drugs. Our politicians aren the enablers of the drug companies and millions are given to assure this.